Building Law - Claims against Builders or Suppliers for Poor Quality Goods or Services

06/06/2016

When a Builder or other person provides goods or does work which is defective, what remedies does the Purchaser have? That is, what can the Purchaser of goods or services do to recover his/her loss arising from those defects?

Examples of such situations are the following:

(a) A Home Owner contracts with a Builder for the Builder to erect a home;

(b) A Builder asks a manufacturer to make goods to order which the Builder then uses to build a home; and

(c) A Builder purchases goods such as window frames for use in the building of a house which goods are defective or of poor quality.

In some or all of these situations, the builder/seller/supplier has certain obligations to provide goods or services of good quality. If the goods or services are not of that quality and the purchaser suffers a loss, then the purchaser of the goods or services may be able to recover that loss.

The legal sources of the obligations to provide goods or services of good quality are the following:

(a) Legislation in New South Wales which implies terms into Home Building Contracts. This Legislation is the Home Building Act, 1989. In that Legislation, the specific terms in relation to quality are fairly complex, but include terms such as that:

(a) work will be performed in a proper and workmanlike manner; and
(b) work will comply with the law.

(b) The Australian Consumer Law (the “ACL”). The ACL implies into Contracts for the supply of goods or services up to $40,000 in relation to those goods or services which are not acquired for personal use various terms in a variety of different areas. Those terms include the following:
(i) that goods not have faults; and

(ii) that goods do what one would expect them to do.

(c) The New South Wales Sale of Goods Act. The Act regulates the supply of goods and sets out implied terms that:

(i) Goods are of merchantable quality, and

(ii) Goods are fit for their purpose.

(d) The General Law. The General Law regulates the supply of goods and services. In the General Law there are implied terms in relation to the supply of goods that goods will be of merchantable quality or fit for their purpose. In relation to the supply of services, there are implied terms that the Contractor will perform work under a Contract with all proper care and skill and secondly that the work will be reasonably fit for the intended purpose.

As a result if any of these terms which are in contracts for the supply of goods or services are breached and there is a loss suffered by the Purchaser, the Purchaser may be able to recover some or all of their loss from the supplier.

If you have any enquiries in relation to issues raised by this article, please feel free to contact Richard Watson of Watson and Watson, Solicitors. We can advise you on the law, help you make claims for recovery of losses and prepare documents or materials for use in Court proceedings which may arise as a result of your loss.

The NSW Civil and Administrative Tribunal (“NCAT”) has jurisdiction and functions as may be confirmed by the NSW Civil and Administrative Tribunal Act (the NCAT Act). The jurisdiction of NCAT is wide and varied. However one needs to find the authority for NCAT to deal with the matter in a particular Act.

It is not unusual for a Municipal or Local Council to stipulate conditions as part of its Consent to a Development Application, such as the Consent is deferred and does not start to operate until the Applicant has satisfied certain conditions.

The HIA standard form Building Contract for residential dwelling construction work contains a separate Deed of Guarantee. The Deed of Guarantee is often utilised in a situation where the property is owned by a company and the company is contracting with the Builder for the construction work. A director of the company may be expected to provide a guarantee on behalf of the owner company.

Usually (but not always) a Builder is required to provide a Home Building Compensation Fund Policy in relation to home building work.
Such a policy covers the home owner and others (as set out in the Home Building Act) in relation to various claims and in particular in relation to:
1. Cost of rectification of defective work; and
2. A contribution to costs to complete incomplete building works.

In New South Wales, there is a system for Contractors (and Sub-Contractors) in building projects to recover moneys owed to them “quickly”. This system has been put in place under the Building and Construction Industry Security of Payments Act (SOP Act). There are some exceptions in the SOP Act. This Act is a law of the NSW parliament.

This article relates to a situation that sometimes arises during a building project where one of the parties becomes insolvent. This insolvency may apply to a corporation or an individual and may apply to both the Builder and the Owner or principal in a project.

In NSW a person who enters into a House Building Contract with a Builder can in certain circumstances, sue that Builder if the house has building defects. In those circumstances, the Owner must bring the case within a certain time frame, which is the Limitation Period.

In New South Wales there is a system by which building professionals “check” that new residential buildings and major renovations have been built to the appropriate standards. This system of certification, which involves the issue of construction certificates and occupation certificates, was at one stage exclusively managed by local authorities.

The Opal Tower building at Australia Avenue at Sydney Olympic Park has recently been in the news. Various people noticed cracking in this multi-storey apartment building in January 2019. After investigation all of the residents left the building and after many weeks have not returned. It is not known when the extent and nature of the defects in the building will be ascertained and how and when the building will be repaired.

When a land owner wants to construct a building, the relevant planning authority will require the owner to have a plan to drain stormwater from the building and the surrounding land. The authority, (usually the local council), will generally insert that requirement into the Development Consent to ensure that the proper drainage of stormwater will become a condition to be complied with prior to the final approval or the construction of the building.

Under the NSW Home Building Act, a person who is a party to a residential building contract with a Builder has certain rights. Implied into such Building Contracts is the statutory warranties provided for under Section 18B of the Home Building Act. We have provided further information in relation to these warranties in our article dated 2 February 2018.

When a person in NSW wants to build a house, townhouse or block of apartments, that person must seek approval to undertake the building works from the local certifying authority. That certifying authority is generally the local council or municipal body. The person seeks this approval by lodging a Development Application with the local council or municipal body. In some circumstances the approval can be granted by a private certifier.

Watson & Watson have been involved in many issues where valuations of real estate were required to enable a party to receive “compensation” based on the valuation. In the past 18 month we have given advice and engaged valuers in relation to matters concerning the following issues.

The NSW Home Building Act, 1989 is a piece of legislation designed to protect Home Owners from defective building works. When parliament passed the legislation into law it recognised that Owners were at a disadvantage when dealing with Builders.

In August 2018 The Owners – Strata Plan 66375 v King the NSW Court of Appeal made findings and decisions in relation to the obligations of the Developer and the Builder under the statutory warranty regime under the Home Building Act.

Watson & Watson have been involved in many cases involving building and construction in particular residential building issues considered in various Courts and Tribunals including particularly at the New South Wales Civil and Administrative Tribunal (NCAT) or its predecessor Consumer Trader and Tenancy Tribunal (CTTT).

Expert witnesses are under obligations of independence and an overriding duty to the Court and Tribunals to present their opinion and evidence accurately and without bias. These duties are well documented in Court cases and also in Codes of Conducts for Experts in various Courts and Tribunals. Providing reports and giving opinion and evidence in accordance with the Code including impartially on matters relevant to the area of expertise of witness overrides the Experts duty to a particular party.

An Owner will either engage a qualified Builder to carry out the work or may obtain a Home Owners Building Permit. This article relates to matters other than work undertaken by the Home Owner directly and in particular with a Home Owner Building Permit.

Watson & Watson have been acting for owners, Builders and others in proceedings brought generally by Owners or subsequent Owners who may be entitled to bring a claim in numerous jurisdictions including the Civil and Administrative Tribunal (NCAT) which has jurisdiction for claims up to $500,000.00. Other claims in excess of that sum are commenced in the District Court of NSW or the Supreme Court of NSW, each of them have jurisdiction.

There are thousands of disputes relating to the quality of building works in particular concerning the construction of residential property including units, apartments, townhouses, duplexes, houses. The Home Building Act 1989 deals with obligations and rights of the parties including the Builder and Owner.

One would have thought that the rules relating to costs would be simple. Unfortunately they are not. Each commentary that we have reviewed has dealt with costs without consideration of the whole of the provisions relating to costs. Assumptions have been made which do not always apply.

Subject to a few exceptions there is legislation including the Workers Compensation Act 1987, the Payroll Tax Act 2008 and the Industrial Relations Act 1996 by which a Principal Contractor may withhold payment to a Sub-Contractor if the Sub-Contractor fails to provide a Sub-Contractor’s Statement, in effect a declaration that the Sub-Contractor has paid all its obligations under the Workers Compensation Act, Payroll Tax Act and Industrial Relations Act.

The Home Building Act 1989 relates to the carrying out of residential building work. Prior to the Home Building Act one needed to look at the express terms of the Contract to determine the obligations of the parties.

More often than one would expect we find that Builders and Owners who enter into Agreements for the construction of renovations or new homes do not have agreements which are enforceable particularly by the Builder against the Owner.

There are many “standard form Contracts” which are in existence including NSW Residential Building Contract for Homes issued by Home Industry Association (HIA), Master Builders Association (MBA) or Australian Building Industry Contracts (ABIC) to name a few.

Often we at Watson & Watson are approached by an Owner or a Builder, where the Owner claims that all moneys have been paid for the building works and that the Builder will not provide the Certificates required to enable the issue of an Occupation Certificate relating to work that has been undertaken at the home.

The Court of Appeal of the Supreme Court of New South Wales recently considered the obligations of a Claimant who had an Adjudication Determination in its favour for approximately $11 million in garnisheeing the Developer’s Bank Account.

In the Court of Appeal Decision Ku-Ring-Gai Council v Chan decided 7 September 2017. Ku-Ring-Gai Council as Certifier was held not liable to the Owner Builder or to the subsequent Purchasers. This was even though Council Inspectors inspected the works on several occasions and failed to identify defects or that the building was not in accordance with the approved plan. The Council issued an Occupation Certificate. The property has been occupied.

When two parties run a Court case and the Court makes a decision, generally the Court awards costs to the winner of the case. So if a Defendant wins its case, the Court will order that the plaintiff pay the legal costs of the defendant.

A recent High Court decision issued on 21 December 2016 has underlined the need for Builders and their lawyers to take care in conducting cases involving Security of Payments claims. That case was the decision of Southern Han Breakfast Point Pty Limited and Lewence Construction Pty Limited.

The Court of Appeal in New South Wales has recently considered an appeal on a case over the Security of Payments Scheme under the Building and Construction Industry Security of Payment Act 1999 (NSW) which could have greatly altered that scheme.

A recent decision of the NSW Supreme Court has confirmed it is vital that parties claiming for building defects obtain properly prepared Building Reports from appropriate and acceptable Experts to give evidence on your behalf in order to recover your losses.

A person who applies for a Building Licence in New South Wales can often find the process complicated. New South Wales law requires that a person who applies for a Building Licence should not only have sufficient education but also enough experience being supervised by a Builder. The rules in New South Wales set out the required building experience, which can involve working on building projects under the supervision of a registered Builder.

This e-Bulletin is to make builder members aware that on 1 September 2010 all building certification work undertaken by a council, must be undertaken by a council officer who is an accredited certifier under the Building Professional Board certifier accreditation scheme.

This paper will focus upon some practical issues that arise in relation to the use of an expert to make a determination. It is hoped that the matters which are identified will assist in avoiding pitfalls that may be overcome in drafting an agreement to submit a dispute that may arise under it for expert determination and also to identify the factors which circumscribe court action which might arise as a result of such a determination.

The Dividing Fences Act provides that adjoining owners of property are required to share equally the costs of a “sufficient dividing fence”, what is a “sufficient dividing fence” will depend upon all the circumstances of the case.